Question

Terminus Company completed two jobs during January, Job Z-15 and Job W-20. Completing Job Z-15 required an additional $2,720 in direct labour and completing Job W-20 required $1,296 in direct materials and $8,000 in direct labour.

The details of the two jobs in process on January 1 are as follows:

Job Z-15

Job W-20

Direct Materials

$ 2,038

$ 1,280

Direct Labour

768

3,360

On January 1 the Materials Inventory balance was $11,040, and $1,392 worth of materials was purchased during the month. Indirect materials of $672 were withdrawn from materials inventory.

Terminus allocates overhead to jobs at an estimated rate of 50 percent of direct labour costs. Terminus used a total of $3,768 of direct materials (excluding the $672 indirect materials) during the period and total direct labour costs during the month were $10,720. In addition, during the month they incurred 2,450 in utilities costs, 1,200 in depreciation expenses and $3,600 in rent.

Question

1. Compute the total costs to manufacture Job Z-15 and Job W-20.
2. During the month of January was Terminus' overhead over or under applied and by how much? Assume the amount of under/over applied overhead is insignificant. Prepare the journal entry to write off the overhead assuming Terminus uses the two account approach for overhead.

Answer 1

Part 1

Terminus Company
Individual Job sheet
Job	Job Z-15	Job W-20	Total
Beginning Work in progress
Direct material	$       2,038	$      1,280	$      3,318
Direct labor	$           768	$      3,360	$      4,128
Applied overhead (Direct labor*50%)	$           384	$      1,680	$      2,064
Beginning work in progress	$       3,190	$      6,320	$      9,510
During period
Direct material (For Z-15 = 3768-1296)	$       2,472	$      1,296	$      3,768
Direct labor	$       2,720	$      8,000	$   10,720
Applied overhead (Direct labor*50%)	$       1,360	$      4,000	$      5,360
Total cost added during period	$       6,552	$    13,296	$   19,848
Total cost	$       9,742	$    19,616	$   29,358

Part 2

Indirect materials	$        672
Utilities cost	$    2,450
Depreciation	$    1,200
Rent	$    3,600
Total Manufacture overhead incurred	$    7,922
Less: Manufacture overhead Applied	$    5,360
Under (Over) applied of overhead	$    2,562
Under applied overhead by	$    2,562

Part 3

Date	General Journal	Debit	Credit
Jan 31	Cost of goods sold	$        2,562
	Manufacture overhead		$        2,562
	(To record under applied of manufacture overhead.)